Our worry is that some shippers are not in continuous improvement mode when it comes to small parcel spend. Consequently, they may be paying more than they need to for shipping services.
Atlanta, Georgia (PRWEB) February 18, 2014
NPI, a leading spend management consulting firm, has identified five areas where shippers are at greatest risk for cost increases with FedEx and UPS in 2014. With general rates 27 to 32 percent higher compared to five years ago, NPI advises companies to mitigate these increases by continuously tuning mode optimization, packaging, service selection, carrier contracts and other factors that, in the aggregate, can yield material cost reductions.
In the fourth quarter of 2013, UPS and FedEx announced general rate increases for ground and air services. While these increases were lower than those issued in previous years, accessorial fees and surcharges are at all-time highs. Additionally, both carriers’ rate structures include buried factors that will impact many customers. These include:
- Dimensional weight is still a budget buster. In 2010, the cost to ship low-weight, large-size packages skyrocketed and it has never come down. Shippers continue to feel the impact of these changes on their budget, and are advised to explore alternative packaging options to lessen the effect on their shipping costs.
- Minimum charges are negating discounts. The minimum charge to ship a package may often eliminate or mitigate any discount in a particular shipper’s contract with the carrier. Both UPS and FedEx have increased the ground minimum charge for shipping 1 lb. packages (zone 2) by 6.8 percent for commercial, and 5.8 percent for residential deliveries.
- Certain zones are bearing the brunt of the rate increase. A cell-by-cell analysis of both carriers’ 2014 general rate increase shows that shipments falling into shorter zones (distances) and lower weights are bearing the brunt of the rate hike.
- Accessorial fees continue to increase. Accessorial fees like ground and air DAS for commercial and residential, address correction and declared value fees are at historical highs. While fee increases continue to be similar between UPS and FedEx, there are a few outliers – including a 33 percent jump in FedEx’s delivery confirmation fee.
- Price increases are targeting cheaper services. As shipping volumes lean towards lower-cost, less-expedited modes, carriers are responding by raising rates for these services. Case in point? On September 18, 2013, FedEx announced higher prices for its popular FedEx Saver and FedEx 2Day Air services.
“Our worry is that some shippers are not in continuous improvement mode when it comes to small parcel spend,” says Jon Winsett, CEO of NPI. “And some are not correctly analyzing the intersection of their carrier contracts with surcharges and accessorial fees as they change over time. Consequently, they may be paying more than they need to for shipping services.”
For more information on NPI’s transportation spend management services, visit http://www.npifinancial.com.
NPI is a spend management consulting firm that protects companies from overspending in specific cost categories – information technology, telecommunication and transportation. Using a combination of market experts, proprietary methodologies and extensive data, NPI ensures that prices and terms are best-in-class. Reviewing more than 14,000 purchases annually, NPI provides objective oversight for billions of dollars of strategic spend for its clients. To learn more about how NPI can help your company start saving today, visit http://www.npifinancial.com or call 404-591-7500.